Cue v. Casualty Corp. of America

• Decision Date: 27 May 1975
• Docket Number: No. 47372,No. 1,47372,1
• Citation: 537 P.2d 349
• Parties: Marie CUE, Appellee, v. CASUALTY CORPORATION OF AMERICA, a corporation, Appellant
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

Page 349

537 P.2d 349

Marie CUE, Appellee, v. CASUALTY CORPORATION OF AMERICA, a corporation, Appellant.

No. 47372.

Court of Appeals of Oklahoma, Division No. 1.

May 27, 1975.

Released for Publication by Order of the Court of Appeals

June 19, 1975.

Bryan Billings, Woodward and Gomer Smith, Jr., Oklahoma City, for appellee.

Romain S. Mossman, Woodward, for appellant.

ROMANG, Presiding Judge:

This is an action by a judgment creditor against a liability insurance carrier to recover an amount in excess of the policy limits on the ground that the carrier refused in bad faith to settle the claim prior to trial. From a judgment awarding plaintiff $2,500.00 the defendant carrier appeals.

Larry Warren Howe had an insurance policy with the appellant, Casualty Corporation of America, which insured him against liability to others for bodily injuries and property damage arising from the operation of his automobile. The policy limits were $5,000.00 for bodily injury to one person, $10,000.00 for bodily injury to two or more persons, and $5,000.00 for property damage.

The policy also contained the following provision:

'Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy.'

While this insurance policy was in force a pickup truck driven by Austin Cue collided with Howe's automobile. Marie Cue, wife of Austin and the appellee herein, was a passenger in the pickup at the time. Austin Cue recovered a judgment against Howe for bodily injury and property damage in the amount of $5,307.69. The appellant paid this judgment.

Marie Cue had filed a separate action at about the same time her husband's action was commenced. Before her husband's case was tried Marie Cue offered to settle her claim for $4,000.00, and Howe demanded of the appellant that the claim be settled for this figure. Casualty Corporation of America refused. After the trial of the husband's case, when the handwriting on the wall was somewhat more legible, the appellant offered $4,250.00, but Marie Cue demanded $4,750.00.

Being unwilling to compromise further, the parties proceeded to try the matter to a jury. This resulted in a verdict in favor of the plaintiff in the amount of $7,500.00. After this verdict was sustained on appeal, Casualty Corporation paid $5,000.00 plus interest, leaving only that part of the judgment which exceeded the policy limits ($2,500.00) unpaid. Marie Cue then brought this action directly against Casualty Corporation and a trial to the court resulted in a $2,500.00 judgment in favor of the plaintiff.

Casualty Corporation seeks reversal of this judgment upon the ground that Marie Cue was not the proper party to bring this action, and further, that it was neither negligent nor in bad faith in refusing to settle.

We agree with the first contention and reverse. We do not reach the question of the appellant's negligence or bad faith. We think the language of the policy provision clearly authorizes a direct action against the insurer by the judgment creditor up to the policy limits (i.e., 'to the extent of the insurance afforded by this policy'). A direct action against the insurer, however, for any amount in excess of the policy limits is outside the scope of this provision. In the latter instance, it is not insurance afforded by the policy which is sought, but rather damages for the tortious failure of the insurer to act carefully and in good faith.

Our research has disclosed no case in which the Supreme Court of the State of Oklahoma has decided this precise question, but in Fidelity & Casualty Co. of New York v. Southall, Okl., 435 P.2d 119 (1967), in deciding a somewhat different point the Court quoted (at page 122), the following passage from 7 Am.Jur.2d, 'Automobile Insurance,' § 159:

"* * * it has been held * * * that a garnishment proceeding by judgment creditors of the insured Will not lie against the insurer on the ground that It was negligent or acted in bad faith in failing to settle the claims against the insured for the reasons that the Insured's cause of action sounds in tort and is therefore An unliquidated tort claim and that it is Not a chose in action subject to garnishment.' (Emphasis added.)

Our attention is invited by the appellee to the case of Hartford Accident & Indemnity Co. v. Day, (10th Cir.) 359 F.2d 484.

Day was indeed a direct action against the insurer, and the policy provision was identical to the provisions contained in Casualty Corporation's policy. In that case, Hartford Accident & Indemnity Co. defended its insured, Wininger, but refused to pay the judgment against him, claiming lack of proper notice. This precipitated Day's direct action for an amount within the policy limits. Against Hartford's argument that Day should have proceeded by garnishment rather than directly, the Court said at page 487:

'. . . We agree with the trial Court that the policy clearly confers upon appellee the right to maintain this action against the liability insurer. See 8 Appleman, Insurance Law and Practice, Sec. 4831.'

The Appleman citation supports the Day decision. In the section cited this statement appears:

'An injured third party who has recovered a judgment against the insured generally has been held to be subrogated to the rights of the latter and he can maintain an action directly against the liability insurer.'

Before we apply the rule to our case, however, we observe a cautionary note sounded by Judge Rodney in Chittick v. State Farm Mutual Automobile Ins. Company, (D.Del.) 170 F.Supp. 276, wherein the court in discussing the Appleman citation says, at page 280,

'The generality of this statement may be somewhat misleading. If it is confined to a liability within the monetary limits of the policy then, perhaps, the statement may be fully accepted. A careful...